No panic for Sainsbury's despite sales slowdown

Sainsbury’s has attracted some pretty negative headlines this morning, after recording its slowest quarterly sales growth for five years in the three months to March 20: like-for-like sales were up just 1.7%. After recording hikes of 7%, 5.7% and 3.7% in the first three quarters of its financial year, there’s a clear downward trend here. However, CEO Justin King reckons this is largely due to slowing food prices – and insists that with total sales up 6.3% (excluding fuel), 1m new customers and a near-7% increase in retail space, last year was still a pretty good one for Sainsbury’s…

King reckons food price inflation has been boosting sales figures at all the big supermarkets over the last year or so – but now it’s apparently running at a ‘little bit above nought’. In other words, any kind of sales hike has to come from shifting more stuff – a much harder task. As a result, most of last quarter’s growth came from non-food, with children’s and women’s clothing doing particularly well, and from petrol, which is benefiting from higher oil prices. Indeed, if you factor in all this stuff, total like-for-likes last quarter were actually up nearly 5%.

King – who described this as a ‘good performance in line with our expectations on top of strong growth last year’ – also claims that Sainsbury is winning market share: total weekly transactions were up by 1m to 19m over the course of the year, while shoppers are apparently increasing their average basket spend. And thanks to its expansion programme, Sainsbury's also has an extra 6.8% of retail space to flog them stuff. So it’s hardly been a bad year for the retailer (as that 6.3% hike shows).

The question is, where does Sainsbury go from here? King admitted this year would be challenging – and with a resurgent Morrisons and Waitrose eager to start snapping at its heels, it may be forgiven for looking over its shoulder. Then again, ‘experts’ have been predicting its decline ever since the start of the recession, and it’s continued to prove the doubters wrong. Will this year be any different?